Online business and state registration?


I'd like to form an LLC for an online business in a state other than mine (I live in California), but am not sure about the state in which I should register the business afterward. The business will sell services only and will have no official physical address in Cali (since I'll operate it from home and will not rent an office).
1) Does that mean I can register the business only in the state in which I'll incorporate, or will I have to register it in California too (and/or other states too)?
2) I plan to move to NY in a couple of years. Does that change anything to q#1?

Thank you!

LLC Incorporation Legal

asked Sep 12 '11 at 22:38
52 points
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2 Answers


What is the reason for not wanting to register in your home state? Is it to save on the CA state fees? If so, your not going to like my answer.

Since you will be operating your business from your home that means your home becomes your place of business, which means you will be "doing business" in CA. Each state has their own definition of what "doing business" in that state means, but most states consider working out of your home as doing business in that state. This means that even if you register your business in another state you will still have to register in CA, and pay CA fees. The best way around this is to become a resident of another state.

Another thing to keep in mind is your company's tax status. You indicate that you want to form an LLC, but you didn't tell us if the company will be a pass-through entity or if it will be taxed like a corporation. By default LLCs are treated as pass-through entities. A pass-through entity is one that does not pay taxes itself, but instead its profits are passed through to its owners, and the owners pay the taxes on their individual tax returns. If your LLC will be a pass-through LLC, then you will also have to pay CA taxes on your profits. See Simple Overview of LLC Pass Through Taxation for more.

For these reasons, I usually recommend startups start by registering in their home state. Once you start making so much money that taxes start becoming an issue (and you can afford a good tax attorney), then revisit this idea.

To answer your other questions, as an online business you won't have to register in every state as long as you don't have a physical presence in those states. See Forming single member LLC for internet website and Which state should I choose for incorporation for a new online sales business for more on this topic.

Moving to NY in the future doesn't really change much right now. You can register in CA now, and then when you move to NY register your business there. See Startup Tax Question - I moved, company didn't for more on this.

answered Sep 13 '11 at 02:16
Zuly Gonzalez
9,194 points
  • Thank you Zuly for this detailed answer. Yes, I'm considering using the pass-through taxes, and I was indeed hoping to save on CA state fees, particularly the $800 yearly fee, at least until I'm sure the business is successful. I guess I won't have much luck with that though. – Claudia 12 years ago
  • @Claudia: You are very welcome. Unfortunately I think you're going to have to pay that $800 CA fee, so you might as well save the money you would have to spend on registering in another state. One possibility is going with a sole-proprietorship instead of an LLC. The biggest drawback of course is that you won't have limited liability protection. The advantage to a sole-prop is that the state fees are usually much less. I believe in most states the fee is $0. Good luck! – Zuly Gonzalez 12 years ago


If you operate the business in CA (from home or otherwise), then you probably will be "doing business" in CA (see discussion below) and, thus, will need to register in CA - meaning you might as well form the LLC in CA in the first place.

The definition of "doing business" is "entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce". This issue is discussed in greater detail in "Doing Business in CA? Be Sure to Register ".

Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.

answered Sep 13 '11 at 06:42
Dana Shultz
6,015 points
  • Thank you. I had actually read this definition, but was hoping that because my online business would not be restricted to just California, I'd be able to form in another state despite my residency here. – Claudia 12 years ago

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